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LUV

Southwest

$39.82

0.05 (0.13%)

, UAL

United Continental

$53.89

-0.315 (-0.58%)

10:22
10/11/16
10/11
10:22
10/11/16
10:22

Bernstein tells airline investors to be picky, likes Southwest best

Research firm Bernstein initiated coverage of several airlines, saying that it is upbeat on the sector and advising investors to own less leveraged airline stocks. SECTOR OUTLOOK: "We are bullish on the sector," wrote Bernstein analyst David Vernon. Although companies in the space are "overearning," their stocks should achieve higher average highs and higher average lows over time, Vernon believes. As reasons for this forecast, Vernon cites airlines' investments in return enhancing programs, their revenue enhancing initiatives, and "a stronger outlook for longer term capital return" that isn't reflected in their valuations. STOCK PICKING CRITERIA: Investors, however, should not own airline stocks "indiscriminately," Vernon stated. Different companies in the sector face different risk in a downturn based not on their valuations, but on their cost structure, the analyst believes. He recommended owning the shares of airlines "that have less financial and operating leverage." Southwest (LUV) and Delta (DAL) have "high returns and low leverage," limiting their risk and increasing the chances that they will return cash to shareholders, the analyst stated. Although United Continental (UAL) has repaired its balance sheet, the company's operating leverage and execution risk have risen, making it less attractive, Vernon warned. Finally, the analyst is bearish on American Airlines (AAL), as he thinks that its capacity growth and financial leverage create significant risk. WHAT'S NOTABLE: American reported today that its traffic fell 1.7% last month versus the same period a year earlier. It said that its third quarter revenue per available seat mile had fallen 2%-3% year-over-year. United Continental said that its traffic had jumped 3.9% in September versus the same period a year earlier. RATINGS, TARGETS: Vernon started coverage of Southwest with an Outperform rating and a $51 price target. He initiated coverage of Delta and United Continental with Market Perform ratings and $43 and $55 price targets, respectively. Vernon launched American with a $31 price target and an Underperform rating. PRICE ACTION: In morning trading, Southwest slipped fractionally to $39.72, Delta dropped 1% to $39.35, United Continental fell 1% to $53.71, and American climbed 0.4% to $39 per share.

LUV

Southwest

$39.82

0.05 (0.13%)

UAL

United Continental

$53.89

-0.315 (-0.58%)

DAL

Delta Air Lines

$39.58

-0.19 (-0.48%)

AAL

American Airlines

$38.89

1.16 (3.07%)

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    Nov

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    Nov

LUV Southwest
$39.82

0.05 (0.13%)

10/11/16
BERN
10/11/16
INITIATION
BERN
Airlines initiated at Bernstein
Bernstein analyst David Vernon initiated coverage of the U.S. airline sector, saying that he is "bullish on the sector" and asserting that it has "favorable..dynamics." He expects the sector's stocks to have "higher average highs and higher average lows over time," driven partly by its investments in return enhancing programs, revenue enhancing initiatives, and "a stronger outlook for longer term capital return" which isn't reflected in valuation, according to the analyst. Vernon recommends owning airlines that have "less financial and operating leverage." He says that he is "favorably disposed" to Southwest (LUV) and Delta Air Lines (DAL), which he says have high returns and low leverage, and is less upbeat on United Continental (UAL), which he says has higher operating leverage and execution risk. He is bearish on American Airlines (AAL), as he thinks that its capacity growth and financial leverage create significant risk. The analyst started coverage of Southwest with an Outperform rating and a $51 price target. He initiated coverage of Delta and United Continental with Market Perform ratings and $43 and $55 price targets, respectively. He launched American with a $31 price target and Underperform rating.
07/27/16
07/27/16
DOWNGRADE

On The Fly: Top five analyst downgrades
Catch up on today's top five analyst downgrades with this list compiled by The Fly: 1. Twitter (TWTR) downgraded to Hold from Buy at Canaccord, to Hold from Buy at Axiom, and to Hold from Buy at Cantor. 2. Southwest (LUV) downgraded to Neutral from Overweight at JPMorgan with analyst Jamie Baker saying the company continues to resist industry efforts aimed at improving revenue, like bag fees and fare increases. 3. Globus Medical (GMED) downgraded to Market Perform from Outperform at Wells Fargo, to Market Perform from Outperform at Leerink, and to Hold from Buy at Canaccord. 4. Linear Technology (LLTC) downgraded to Equal Weight from Overweight at Morgan Stanley. 5. Analog Devices (ADI) downgraded to Neutral from Buy at Citi with analyst Christopher Danely saying he views the stock as fairly valued at current levels. This list is just a portion of The Fly's full analyst coverage. To see The Fly's full Street Research coverage, click here.
09/09/16
IMPC
09/09/16
INITIATION
Target $46
IMPC
Outperform
Southwest initiated with an Outperform at Imperial Capital
Imperial Capital analyst Michael Derchin started Southwest Airlines with an Outperform rating and $46 price target. Concerned that the company's cost gap will erode over time are overblown, Derchin tells investors in a research note. He believes Southwest warrants a premium valuation to the big three airlines since it can maintain a "meaningful cost and margin advantage because of its low cost business model."
10/10/16
BERN
10/10/16
INITIATION
Target $51
BERN
Outperform
Southwest initiated with an Outperform at Bernstein
Bernstein analyst David Vernon initiated Southwest with an Outperform and a $51 price target.
UAL United Continental
$53.89

-0.315 (-0.58%)

08/30/16
RAJA
08/30/16
UPGRADE
RAJA
Outperform
United Continental upgraded to Outperform from Market Perform at Raymond James
As previously reported, Raymond James analyst Savanthi Syth upgraded United Continental to Outperform with a $65 price target following the announcement of Scott Kirby as President and Andrew Levy as CFO. Kirby joins United from American Airlines (AAL), as announced last night, and Levy joins from Allegiant Travel (ALGT), as announced earlier this month. The analyst said both executives have strong industry experience and Syth has increased conviction United will reduce it margin gap relative to its peers over the next 12-18 months. Further, competitive capacity pressures will likely improve and easing comps should benefit sequential revenue trends in 2017, the analyst tells investors.
08/30/16
08/30/16
UPGRADE

On The Fly: Top five analyst upgrades
Catch up on today's top five analyst upgrades with this list compiled by The Fly: 1. McDonald's (MCD) upgraded to Outperform from Neutral at Baird by analyst David Tarantino, who believes the stock's risk/reward has become more favorable following the year-to-date underperformance. The analyst admits that slower U.S. industry demand trends and challenging upcoming comparisons pose a "short-term headwind," but thinks the company's "attractive" dividend yield can help to limit further downside risk in the shares. 2. United Continental (UAL) upgraded to Outperform from Market Perform at Raymond James, with analyst Savanthi Syth applauding the selection of Scott Kirby as President and Andrew Levy as CFO. Syth said both have strong industry experience and has increased conviction United will reduce its margin gap relative to its peers over the next 12-18 months. 3. VMware (VMW) upgraded to Buy from Neutral by SunTrust analyst John Rizzuto, who says that the company has effectively diversified beyond its server virtualization roots. The analyst, who expects the company's revenue to bottom this year and accelerate through the end of the decade, raised his price target on the stock to $92 from $64. 4. Barracuda (CUDA) upgraded to Overweight from Sector Weight at Pacific Crest, as analyst Rob Owens said he's seeing improved trends due to the company's renewed product alignment and cloud-centric channel marketing campaign. 5. Fortinet (FTNT) upgraded to Overweight from Sector Weight at Pacific Crest by Rob Owens, who believes management's focus on enhanced profitability should drive share outperformance. This list is just a portion of The Fly's full analyst coverage. To see The Fly's full Street Research coverage, click here.
10/11/16
BERN
10/11/16
INITIATION
Target $55
BERN
Market Perform
United Continental initiated with a Market Perform at Bernstein
Bernstein analyst David Vernon initiated United Continental with a Market Perform and a $55 price target.
DAL Delta Air Lines
$39.58

-0.19 (-0.48%)

10/10/16
BERN
10/10/16
INITIATION
Target $43
BERN
Market Perform
Delta Air Lines initiated with a Market Perform at Bernstein
Bernstein analyst David Vernon initiated Delta Air Lines with a Market Perform and a $43 price target.
08/24/16
08/24/16
INITIATION

On The Fly: Top five analyst initiations
Catch up on today's top five analyst initiations with this list compiled by The Fly: 1. Lockheed Martin (LMT) reinstated with a Neutral at Goldman. 2. Five Below (FIVE) initiated with a Neutral at BTIG. 3. AMC Entertainment (AMC) and Cinemark (CNK) were initiated with a Buy at Loop Capital while the firm initiated Regal Entertainment (RGC) with a Hold. 4. Delta Air Lines (DAL) initiated with an In-Line at Imperial Capital. 5. LINE Corp. (LN) initiated with a Neutral at JPMorgan. This list is just a portion of The Fly's analyst coverage. To see The Fly's full Street Research coverage, Reference Link
08/24/16
IMPC
08/24/16
INITIATION
Target $41
IMPC
In-Line
Delta Air Lines initiated with an In-Line at Imperial Capital
Imperial Capital analyst Michael Derchin initiated Delta Air Lines with an In-Line and $41 price target citing the potential impact on UK business travel from Brexit and deteriorating economic, social and terrorism problems in Europe.
AAL American Airlines
$38.89

1.16 (3.07%)

10/10/16
BERN
10/10/16
INITIATION
Target $31
BERN
Underperform
American Airlines initiated with an Underperform at Bernstein
Bernstein analyst David Vernon initiated American Airlines with an Underperform and a $31 price target.
09/21/16
09/21/16
DOWNGRADE

On The Fly: Top five analyst downgrades
Catch up on today's top five analyst downgrades with this list compiled by The Fly: 1. Wells Fargo (WFC) downgraded to Neutral from Overweight at JPMorgan with analyst Vivek Juneja saying the "tough" Senate hearings and "mounting public scrutiny" will likely result in additional investigations that could pressure expenses. 2. Skechers (SKX) downgraded to Equal Weight from Overweight at Morgan Stanley with analyst Jay Sole saying he believes consumers shift towards pure fashion styles and away from athletic footwear is causing Skechers to adjust assortment, resulting in slower sales growth. 3. American Airlines (AAL) downgraded to Market Perform from Outperform at Raymond James analyst Savanthi Syth citing relative valuation and lowered estimates to reflect the new mechanics contract. 4. Boston Beer (SAM) downgraded to Underperform from Market Perform at Cowen with analyst Vivien Azer citing its string of disappointing monthly Nielsen data and structural headwinds to the company's core assets, which present meaningful earnings risk. 5. Children's Place (PLCE) downgraded to Neutral from Overweight at Piper Jaffray with analyst Stephanie Wissink saying the firm's recent survey of moms pointed to a "step down" in mindshare. This list is just a portion of The Fly's full analyst coverage. To see The Fly's full Street Research coverage, click here.
09/21/16
RAJA
09/21/16
DOWNGRADE
RAJA
Market Perform
American Airlines downgraded to Market Perform from Outperform at Raymond James
Raymond James analyst Savanthi Syth downgraded American Airlines to Market Perform due to relative valuation and lowered estimates to reflect the new mechanics contract.

TODAY'S FREE FLY STORIES

DAL

Delta Air Lines

$48.38

0.61 (1.28%)

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CBI

CB&I

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MGM

MGM Resorts

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VASC

Vascular Solutions

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NUS

Nu Skin

$50.75

0.52 (1.04%)

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SPY

SPDR S&P 500 ETF Trust

$219.77

0.1999 (0.09%)

, IVV

iShares Core S&P 500

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0.29 (0.13%)

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SPDR S&P 500 ETF Trust

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SPDR Oil Exploration and Production Fund

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FXR

First Trust Industrials/Producer Durables AlphaDEX Fund

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SPDR Gold Trust

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IAU

iShares Gold Trust

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PBIB

Porter Bancorp

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ALIOF

Actelion

$190.80

-5.45 (-2.78%)

, JNJ

Johnson & Johnson

$111.93

0.55 (0.49%)

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Periodicals
Actelion's silence speaks volumes to hedge funds, Reuters says »

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Actelion

$190.80

-5.45 (-2.78%)

JNJ

Johnson & Johnson

$111.93

0.55 (0.49%)

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NVCN

Neovasc

$0.51

0.0018 (0.35%)

, BSX

Boston Scientific

$20.33

0.235 (1.17%)

12:31
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Recommendations
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NVCN

Neovasc

$0.51

0.0018 (0.35%)

BSX

Boston Scientific

$20.33

0.235 (1.17%)

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FE

FirstEnergy

$30.62

-0.37 (-1.19%)

12:30
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IBKC

IBERIABANK

$84.15

1.3 (1.57%)

12:26
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Treasury Option Action: and now some bullish call buying »

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PBIB

Porter Bancorp

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$NYE

NYSE Market Internals

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$NSD

NASDAQ Market Internals

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Porter Bancorp

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SBUX

Starbucks

$58.51

0.54 (0.93%)

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Workday

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ULTA

Ulta Beauty

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-2.09 (-0.81%)

P

Pandora

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SIRI

Sirius XM

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BX

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$25.82

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GM

General Motors

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JPM

JPMorgan

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BLK

BlackRock

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DIS

Disney

$98.47

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WMT

Wal-Mart

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IBM

IBM

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INFO

IHS Markit

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ASNA

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FIVE

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AMBA

Ambarella

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SWHC

Smith & Wesson

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ATI

Allegheny Technologies

$16.05

-1.71 (-9.63%)

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    Oct

SOHO

Sotherly Hotels

$5.48

-0.01 (-0.18%)

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FCAU

Fiat Chrysler

$7.65

-0.09 (-1.16%)

12:10
12/02/16
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12:10
Options
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  • 10

    Jan

PBIB

Porter Bancorp

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DB

Deutsche Bank

$15.80

-0.26 (-1.62%)

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  • 10

    Jan

OZM

Och-Ziff Capital

$3.14

0.18 (6.08%)

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ETSY

Etsy

$11.93

-0.47 (-3.79%)

12:00
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  • 05

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